It is proposed that this filing will become effective: (check appropriate box)

X immediately upon filing pursuant to paragraph (b); or

on
pursuant to paragraph (b); or

60 days after filing pursuant to paragraph (a)(1); or

on
pursuant to paragraph (a)(1); or

75 days after filing pursuant to paragraph (a)(2); or

on
pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a previously filed post-effective
amendment.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the Securities Act), and the Investment Company Act of 1940, as
amended (the 1940 Act), Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act and has duly caused this Post-Effective Amendment No. 39
under the Securities Act and Amendment No. 42 under the 1940 Act to be signed on its behalf by the undersigned, duly authorized, in the City of Dallas, State of Texas on this 15th day of November, 2013.

By:

/s/ Ethan Powell

Ethan Powell

Executive Vice President
and

Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 39 to
Registrants Registration Statement on Form N-1A has been signed below by the following persons in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Ethan Powell

Ethan Powell

Executive Vice President

and
Secretary (Principal

Executive Officer)

November 15, 2013

/s/ Timothy K. Hui*

Timothy K. Hui

Trustee

November 15, 2013

/s/ Scott F. Kavanaugh*

Scott F. Kavanaugh

Chairman of the Board,

Trustee

November 15, 2013

/s/ Bryan A. Ward*

Bryan A. Ward

Trustee

November 15, 2013

/s/ Brian Mitts

Brian Mitts

Treasurer (Principal

Financial
Officer and

Principal Accounting Officer)

November 15, 2013

* By:

/s/ Ethan Powell

Ethan Powell

Attorney in Fact*

November 15, 2013

*Pursuant to Power of Attorney incorporated herein by reference to Post-Effective Amendment No. 27 to Registrants Registration Statement on
Form N-1A, File No. 333-132400, filed on June 10, 2011.

Exhibit Index

Exhibit No.

EX-101.INS

XBRL Instance Document

EX-101.SCH

XBRL Taxonomy Extension Schema Document

EX-101.CAL

XBRL Taxonomy Extension Calculation Linkbase

EX-101.DEF

XBRL Taxonomy Extension Definition Linkbase

EX-101.LAB

XBRL Taxonomy Extension Labels Linkbase

EX-101.PRE

XBRL Taxonomy Extension Presentation Linkbase

EX-101.INS
2
hfi-20131028.xml
XBRL INSTANCE DOCUMENT
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You may qualify for sales charge discounts on purchases of Class A Shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund. More information about these and other discounts is available from your financial intermediary and in &#8220;Shareowner Guide &#8212; How to Invest in the Highland Funds &#8212; Sales Charges &#8212; Class A Shares&#8221; on page 43 of the Fund&#8217;s Prospectus and in &#8220;Programs for Reducing or Eliminating Sales Charges&#8221; on page 58 of the Fund&#8217;s Statement of Additional Information.<b>Shareholder Fees</b> (fees paid directly from your investment)The following tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts on purchases of Class A Shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund. More information about these and other discounts is available from your financial intermediary and in &#8220;Shareowner Guide &#8212; How to Invest in the Highland Funds &#8212; Sales Charges &#8212; Class A Shares&#8221; on page 43 of the Fund&#8217;s Prospectus and in &#8220;Programs for Reducing or Eliminating Sales Charges&#8221; on page 58 of the Fund&#8217;s Statement of Additional Information.Shareholder Fees (fees paid directly from your investment)0.035000000000.03250.01000.01000000000000000You may qualify for sales charge discounts on purchases of Class A Shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund.50000Annual Fund Operating Expenses (expenses that you pay each year as % of the value of your investment)0.00650.00650.00650.00650.00350.0070.008500.00760.00920.00770.00630.00140.00180.00140.0010.00620.00740.00630.00530.01760.02270.02270.0128-0.0046-0.0062-0.0047-0.00330.0130.01650.0180.0095Annual Fund Operating Expenses (expenses that you pay each year as % of the value of your investment)Expense ExampleThis Example helps you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The Example assumes that (i) you invest $10,000 in the Fund for the time periods indicated and then sell or redeem all your shares at the end of those periods, (ii) your investment has a 5% return each year, and (iii) operating expenses remain the same. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.Portfolio TurnoverThe Fund pays transaction costs, such as commissions, when it buys and sells securities (or &#8220;turns over&#8221; its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the expense example, affect the Fund&#8217;s performance. During the most recent fiscal year, the Fund&#8217;s portfolio turnover rate was 1,035% of the average value of its portfolio.-0.02170.14040.0584Principal Investment Strategies-0.1333Principal RisksExpense ExampleThis Example helps you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The Example assumes that (i) you invest $10,000 in the Fund for the time periods indicated and then sell or redeem all your shares at the end of those periods, (ii) your investment has a 5% return each year, (iii) operating expenses remain the same, and (iv) the Fund has borrowed an average of 3.20% of the Fund&#8217;s assets annually. Your actual costs may be higher or lower.Risk/Return Bar Chart and Table47949428498The bar chart and the performance table below provide an indication of the risks of investing in the Fund by showing changes in the performance of the Fund&#8217;s Class A Shares for the most recent calendar year and by showing how the Fund&#8217;s average annual returns for the Fund&#8217;s Class A, Class C and Class Z Shares compared to those of a broad measure of market performance. As with all mutual funds, the Fund&#8217;s past performance (before and after taxes) does not predict how the Fund will perform in the future. Both the chart and the table assume the reinvestment of dividends and distributions. The table reflects the deduction of applicable sales charges for Class A and Class C Shares. The bar chart does not reflect the deduction of applicable sales charges for Class A Shares. If sales charges had been reflected, the returns for Class A Shares would be less than those shown below. Updated information on the Fund&#8217;s performance can be obtained by visiting https://www.highlandfunds.com/Funds&#8212;&#8212;&#8212;Performance/Mutual-Funds/Alternative-Investment/Long-Short-Healthcare or by calling 1-877-665-1287.8458536673771235126411776762325244025791527Annual Total Return<br/>(As of December 31 for Class A Shares)The highest calendar quarter total return for Class A Shares of the Fund was 16.25% for the quarter ended December 31, 2009 and the lowest calendar quarter total return was (11.78)% for the quarter ended March 31, 2009.169184Performance Table<br/><br/>Annualized Total Returns for the period ended December 31, 2012 (sales charge included)65366711641177244025792008-05-052008-05-052008-05-052008-05-052008-05-052008-04-302008-04-30Portfolio TurnoverThe Fund pays transaction costs, such as commissions, when it buys and sells securities (or &#8220;turns over&#8221; its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the expense example, affect the Fund&#8217;s performance. During the fiscal year ended June 30, 2013, the portfolio turnover rate of the Fund was 71% of the average value of its portfolio.Principal Investment StrategiesAfter-tax returns in the table above are shown for Class A Shares only and will differ for Class C and Class Z Shares. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor&#8217;s tax situation and may differ from those shown. For example, after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.Under normal market conditions, the Fund seeks to achieve its objective by investing directly and indirectly (e.g., through derivatives that are the economic equivalent of floating rate loans and other floating rate investments) at least 80% of its net assets (plus any borrowings for investment purposes) in floating rate loans and other securities deemed to be floating rate investments. Floating rate investments are debt obligations of companies or other entities, the interest rates of which float or vary periodically based upon a benchmark indicator of prevailing interest rates. Floating rate investments may include, by way of example, floating rate debt securities, money market securities of all types and repurchase agreements with remaining maturities of no more than 60 days. The reference in the Fund&#8217;s investment objective to capital preservation does not indicate that the Fund may not lose money. The investment adviser seeks to employ strategies that are consistent with capital preservation, but there can be no assurance that the investment adviser will be successful in doing so.<br/><br/>Floating rate loans in which the Fund invests are expected to be adjustable rate senior loans (&#8220;Senior Loans&#8221;) to domestic or foreign corporations, partnerships and other entities that operate in a variety of industries and geographic regions (&#8220;Borrowers&#8221;). Senior Loans are business loans that have a right to payment senior to most other debts of the Borrower. Senior Loans generally are arranged through private negotiations between a Borrower and several financial institutions (the &#8220;Lenders&#8221;) represented in each case by one or more such Lenders acting as agent (the &#8220;Agent&#8221;) of the several Lenders. On behalf of the Lenders, the Agent is primarily responsible for negotiating the loan agreement (&#8220;Loan Agreement&#8221;) that establishes the relative terms and conditions of the Senior Loan and rights of the Borrower and the Lenders.<br/><br/>The Fund may invest in securities of any credit quality. Senior Loans are typically below investment grade securities (also known as &#8220;high yield securities&#8221; or &#8220;junk securities&#8221;). Such securities are rated below investment grade by a nationally recognized statistical rating organization (&#8220;NRSRO&#8221;) or are unrated but deemed by the Adviser to be of comparable quality. The Fund may invest without limitation in below investment grade or unrated securities, including in insolvent borrowers or borrowers in default.<br/><br/>The Fund may invest in participations (&#8220;Participations&#8221;) in Senior Loans, may purchase assignments (&#8220;Assignments&#8221;) of portions of Senior Loans from third parties, and may act as one of the group of Lenders originating a Senior Loan (&#8220;Primary Lender&#8221;). Senior Loans often are secured by specific assets of the Borrower, although the Fund may invest without limitation in Senior Loans that are not secured by any collateral. When the Fund acts as a Primary Lender, the Fund or the investment adviser could be subject to allegations of lender liability.<br/><br/>Senior Loans in which the Fund invests generally pay interest at rates that are periodically redetermined by reference to a base lending rate plus a spread.<br/><br/>In addition, the Fund may invest up to 20% of its total assets in equity or debt securities other than floating rate investments. The Fund may invest in equity securities of companies of any market capitalization, market sector or industry. Equity securities of U.S. or non-U.S. issuers in which the Fund may invest include common stocks, preferred stocks, convertible securities, depositary receipts and warrants to buy common stocks. The Fund may invest in securities issued by other investment companies, including exchange-traded funds (&#8220;ETFs&#8221;).<br/><br/>The Fund may invest in derivatives and may use derivatives as tools in the management of portfolio assets. The Fund may use derivatives, such as credit default swaps and credit default index investments, including loan credit default swaps and loan credit default index swaps, options, warrants, futures and forwards, to hedge various investments for risk management and as a substitute for a direct investment in an asset class or a particular issuer. The Fund may invest in derivative instruments, including for hedging and substitution purposes, to the extent permitted by the Investment Company Act of 1940, as amended (the &#8220;1940 Act&#8221;).<br/><br/>The Fund may also engage in short sales of securities and may seek additional income by making secured loans of its portfolio securities.<br/><br/>The Fund may invest without limitation in securities (including loans) of non-U.S. issuers, including emerging market issuers. Such securities (including loans) may be denominated in U.S. dollars, non-U.S. currencies or multinational currency units.<br/><br/>The Fund may borrow an amount up to 33 1/3% of its total assets (including the amount borrowed). The Fund may borrow for investment purposes, to meet redemption requests and for temporary, extraordinary or emergency purposes. To the extent the Fund borrows more money than it has cash or short-term cash equivalents and invests the proceeds, the Fund will create financial leverage. The use of borrowing for investment purposes increases both investment opportunity and investment risk.<br/><br/>The foregoing percentage limitations and ratings criteria apply at the time of purchase of securities.<br/><br/>The Fund is non-diversified as defined in the 1940 Act, but it will adhere to the diversification requirements applicable to regulated investment companies (&#8220;RICs&#8221;) under Subchapter M of the Internal Revenue Code of 1986, as amended (the &#8220;Code&#8221;). The Fund is not intended to be a complete investment program.Principal Risks10.350.01030.01070.01130.03560.04240.03280.02920.03610.0267When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund.When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund. No assurance can be given that the Fund will achieve its objective, and investment results may vary substantially over time and from period to period. An investment in the Fund is not appropriate for all investors.<br></br><b>Counterparty Risk.</b> A counterparty (the other party to a transaction or an agreement or the party with whom the Fund executes transactions) to a transaction with the Fund may be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations.<br></br><b>Credit Risk.</b> The issuers of certain securities or the counterparties of a derivatives contract or repurchase contract might be unable or unwilling (or perceived as being unable or unwilling) to make interest and/or principal payments when due, or to otherwise honor its obligations. Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Net Asset Value (&#8220;NAV&#8221;) of the Fund.<br></br><b>Currency Risk.</b> Fluctuations in exchange rates will adversely affect the value of the Fund&#8217;s foreign currency holdings and investments denominated in foreign currencies.<br></br><b>Debt Securities Risk.</b> The value of debt securities typically changes in response to various factors, including, by way of example, market-related factors (such as changes in interest rates or changes in the risk appetite of investors generally) and changes in the actual or perceived ability of the issuer (or of issuers generally) to meet its (or their) obligations. During periods of rising interest rates, debt securities generally decline in value. Conversely, during periods of falling interest rates, debt securities generally rise in value. This kind of market risk is generally greater for Funds investing in debt securities with longer maturities.<br></br><b>Derivatives Risk.</b> Derivatives Risk is a combination of several risks, including the risks that: (1) an investment in a derivative instrument may not correlate well with the performance of the securities or asset class to which the Fund seeks exposure, (2) derivative contracts, including options, may expire worthless and the use of derivatives may result in losses to the Fund, (3) a derivative instrument entailing leverage may result in a loss greater than the principal amount invested, (4) derivatives not traded on an exchange may be subject to credit risk, for example, if the counterparty does not meet its obligations (see also &#8220;Counterparty Risk&#8221;), and (5) derivatives not traded on an exchange may be subject to liquidity risk and the related risk that the instrument is difficult or impossible to value accurately. As a general matter, when a Fund establishes certain derivative instrument positions, such as certain futures, options and forward contract positions, it will segregate liquid assets (such as cash, U.S. Treasury bonds or commercial paper) equivalent to the Fund&#8217;s outstanding obligations under the contract or in connection with the position. In addition, recent legislation has called for a new regulatory framework for the derivatives market. The impact of the new regulations are still unknown, but has the potential to increase the costs of using derivatives, may limit the availability of some forms of derivatives or the Fund&#8217;s ability to use derivatives, and may adversely affect the performance of some derivative instruments used by the Fund as well as the Fund&#8217;s ability to pursue its investment objective through the use of such instruments.<br></br><b>Emerging Markets Risk.</b> Investing in securities of issuers tied economically to emerging markets entails all of the risks of investing in securities of non-U.S. issuers detailed below under &#8220;Non-U.S. Securities Risk&#8221; to a heightened degree. These heightened risks include: (i) greater risks of expropriation, confiscatory taxation, nationalization, and less social, political and economic stability; (ii) the smaller size of the markets for such securities and a lower volume of trading, resulting in lack of liquidity and in price volatility; (iii) greater fluctuations in currency exchange rates; and (iv) certain national policies that may restrict a Fund&#8217;s investment opportunities, including restrictions on investing in issuers or industries deemed sensitive to relevant national interests.<br></br><b>Equity Securities Risk.</b> Because it may purchase common stocks and other equity securities, the Fund is subject to the risk that stock prices will fall over short or long periods of time. In addition, common stocks represent a share of ownership in a company, and rank after bonds and preferred stock in their claim on the company&#8217;s assets in the event of bankruptcy.<br></br><b>ETF Risk.</b> The price movement of an ETF may not exactly track the underlying index and may result in a loss. In addition, shareholders bear both their proportionate share of the Fund&#8217;s expenses and similar expenses of the underlying investment company when the Fund invests in shares of another investment company.<br></br><b>Focused Investment Risk.</b> The Fund&#8217;s investments in Senior Loans arranged through private negotiations between a Borrower and several financial institutions may expose the Fund to risks associated with the financial services industry. The financial services industry is subject to extensive government regulation, which can limit both the amounts and types of loans and other financial commitments financial services companies can make and the interest rates and fees they can charge. Profitability is largely dependent on the availability and cost of capital funds, and can fluctuate significantly when interest rates change. Because financial services companies are highly dependent on short-term interest rates, they can be adversely affected by downturns in the U.S. and foreign economies or changes in banking regulations. Losses resulting from financial difficulties of borrowers can negatively affect financial services companies. The financial services industry is currently undergoing relatively rapid change as existing distinctions between financial service segments become less clear. This change may make it more difficult for the Adviser to analyze investments in this industry. Additionally, the recently increased volatility in the financial markets and implementation of the recent financial reform legislation may affect the financial services industry as a whole in ways that may be difficult to predict.<br></br><b>Hedging Risk.</b> Although intended to limit or reduce investment risk, hedging strategies may also limit or reduce the potential for profit. There is no assurance that hedging strategies will be successful.<br></br><b>High Yield Debt Securities Risk.</b> Below investment grade securities or unrated securities of similar credit quality (commonly known as &#8220;high yield securities&#8221; or &#8220;junk securities&#8221;) are more likely to default than higher rated securities. The Fund&#8217;s ability to invest in high-yield debt securities generally subjects the Fund to greater risk than securities with higher ratings. Such securities are regarded by the rating organizations as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. The market value of these securities is more sensitive to corporate developments and economic conditions and can be volatile. Market conditions can diminish liquidity and make accurate valuations difficult to obtain.<br></br><b>Illiquid and Restricted Securities Risk.</b> The Adviser may not be able to sell illiquid or restricted securities at the price it would like or may have to sell them at a loss. Securities of non-U.S. issuers and emerging markets securities in particular, are subject to greater liquidity risk.<br></br><b>Interest Rate Risk.</b> When interest rates decline, the value of fixed rate securities already held by the Fund can be expected to rise. Conversely, when interest rates rise, the value of existing fixed rate portfolio securities can be expected to decline. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. However, the Fund will primarily invest in floating rate obligations, including Senior Loans, the rates on which periodically adjust with changes in market interest rates. Consequently, the Fund&#8217;s exposure to fluctuations in interest rates will generally be limited to the time that the interest rates on the Senior Loans in its portfolio are reset.<br></br><b>Leverage Risk.</b> The Fund is authorized to borrow in an amount up to 33 1/3% of its total assets (including the amount borrowed). The use of leverage for investment purposes creates opportunities for greater total returns, but at the same time involves risks. Any investment income or gains earned with respect to the amounts borrowed that are in excess of the interest that is due on the borrowing will augment the Fund&#8217;s income. Conversely, if the investment performance with respect to the amounts borrowed fails to cover the interest on such borrowings, the value of the Fund&#8217;s shares may decrease more quickly than would otherwise be the case. Interest payments and fees incurred in connection with such borrowings will reduce the amount of net income available for payment to Fund shareholders.<br></br><b>Limited Information Risk.</b> The types of Senior Loans in which the Fund will invest historically may not have been rated by a NRSRO, have not been registered with the SEC or any state securities commission, and have not been listed on any national securities exchange. Although the Fund will generally have access to financial and other information made available to the Lenders in connection with Senior Loans, the amount of public information available with respect to Senior Loans will generally be less extensive than that available for rated, registered or exchange-listed securities. As a result, the performance of the Fund and its ability to meet its investment objective is more dependent on the analytical ability of the Adviser than would be the case for an investment company that invests primarily in rated, registered or exchange-listed securities.<br></br><b>Management Risk.</b> The Fund relies on the Adviser&#8217;s ability to achieve its investment objective. The Adviser may be incorrect in its assessment of the intrinsic value of companies whose securities the Fund holds, which may result in a decline in the value of Fund shares and failure to achieve its investment objective. The Fund&#8217;s portfolio managers use qualitative analyses and/or models. Any imperfections or limitations in such analyses and models could affect the ability of the portfolio managers to implement strategies.<br></br><b>Non-Diversification Risk</b>. As a non-diversified fund for the purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund.<br></br><b>Non-Payment Risk.</b> Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Net Asset Value (&#8220;NAV&#8221;) of the Fund.<br></br><b>Non-U.S. Securities Risk.</b> Investments in securities of non-U.S. issuers involve certain risks not involved in domestic investments (for example, fluctuations in foreign exchange rates (for non-U.S. securities not denominated in U.S. dollars); future foreign economic, financial, political and social developments; nationalization; exploration or confiscatory taxation; smaller markets; different trading and settlement practices; less governmental supervision; and different accounting, auditing and financial recordkeeping standards and requirements) that may result in the Fund experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies. These risks are magnified for investments in issuers tied economically to emerging markets, the economies of which tend to be more volatile than the economies of developed markets. In addition, certain investments in non-U.S. securities may be subject to foreign withholding taxes on interest, dividends, capital gains or other income. Those taxes will reduce the Fund&#8217;s yield on any such securities. See the &#8220;Taxation&#8221; section below.<br></br><b>Ongoing Monitoring Risk.</b> On behalf of the several Lenders, the Agent generally will be required to administer and manage the Senior Loans and, with respect to collateralized Senior Loans, to service or monitor the collateral. Financial difficulties of Agents can pose a risk to the Fund. Unless, under the terms of the loan, the Fund has direct recourse against the Borrower, a Fund may have to rely on the Agent or other financial intermediary to apply appropriate credit remedies against a Borrower.<br></br><b>Payment-in-Kind Securities Risk.</b> The value of payment-in-kind securities (&#8220;PIKs&#8221;) held by the Fund may be more sensitive to fluctuations in interest rates than other securities. PIKs pay all or a portion of their interest or dividends in the form of additional securities. Federal tax law requires that the interest on PIK bonds be accrued as income to the Fund regardless of the fact that the Fund will not receive cash until such securities mature. Since the income must be distributed to shareholders, the Fund may be forced to liquidate other securities in order to make the required distribution.<br></br><b>Portfolio Turnover Risk.</b> High portfolio turnover will increase the Fund&#8217;s transaction costs and may result in increased realization of net short-term capital gains (which are taxable to shareholders as ordinary income when distributed to them), higher taxable distributions and lower after-tax performance.<br></br><b>Prepayment </b>Risk. During periods of falling interest rates, issuers of debt securities may repay higher rate securities before their maturity dates. This may cause the Fund to lose potential price appreciation and to be forced to reinvest the unanticipated proceeds at lower interest rates. This may adversely affect the NAV of the Fund&#8217;s shares.<br></br><b>Regulatory Risk.</b> To the extent that legislation or state or federal regulators impose additional requirements or restrictions with respect to the ability of financial institutions to make loans in connection with highly leveraged transactions, the availability of Senior Loan interests for investment by the Fund may be adversely affected.<br></br><b>Risk of Substantial Redemptions.</b> If substantial numbers of shares in the Fund were to be redeemed at the same time or at approximately the same time, the Fund might be required to liquidate a significant portion of its investment portfolio quickly to meet the redemptions. The Fund might be forced to sell portfolio securities at prices or at times when it would otherwise not have sold them.<br></br><b>Securities Lending Risk.</b> The fund may make secured loans of its portfolio securities. Any decline in the value of a portfolio security that occurs while the security is out on loan is borne by the Fund, and will adversely affect performance. Also, there may be delays in recovery of securities loaned, losses in the investment of collateral, and loss of rights in the collateral should the borrower of the securities fail financially while holding the security.<br></br><b>Securities Market Risk.</b> The value of securities owned by the Fund may go up or down, sometimes rapidly or unpredictably, due to factors affecting particular companies or the securities markets generally. A general downturn in the securities market may cause multiple asset classes to decline in value simultaneously. Many factors can affect this value and you may lose money by investing in the Fund.<br></br><b>Senior Loans Risk.</b> The risks associated with Senior Loans are similar to the risks of below investment grade securities. Senior Loans and other debt securities are also subject to the risk of price declines and to increases in prevailing interest rates. The Fund&#8217;s investments in Senior Loans are typically below investment grade and are considered speculative because of the credit risk of their issuers. The secondary market for loans is generally less liquid than the market for higher grade debt. Less liquidity in the secondary trading market could adversely affect the price at which the Fund could sell a loan, and could adversely affect the NAV of the Fund&#8217;s shares. The volume and frequency of secondary market trading in such loans varies significantly over time and among loans.<br></br><b>Short Sales Risk.</b> This is the risk of loss associated with any appreciation on the price of a security borrowed in connection with a short sale. The Fund may engage in short sales that are not made &#8220;against-the-box&#8221; (as defined under &#8220;Description of Principal Investments&#8221;), which means that the Fund may sell short securities even when they are not actually owned or otherwise covered at all times during the period the short position is open. Short sales that are not made &#8220;against-the-box&#8221; theoretically involve unlimited loss potential since the market price of securities sold short may continuously increase.<br></br>An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. As with any mutual fund, there is no guarantee that the Fund will achieve its goal.Risk/Return Bar Chart and Table for the Fund<b>Non-Diversification Risk.</b> As a non-diversified fund for the purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund. This risk is particularly pronounced for the Fund, which from time to time may own a very small number of positions, each of which is a relatively large portion of the Fund&#8217;s portfolio.An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency.The bar chart and the performance table below provide an indication of the risks of investing in the Fund by showing changes in the performance of the Fund&#8217;s Class A Shares from year to year and by showing how the Fund&#8217;s average annual returns for the Fund&#8217;s Class A, Class B, Class C and Class Z Shares compared to those of a broad measure of market performance. As with all mutual funds, the Fund&#8217;s past performance (before and after taxes) does not predict how the Fund will perform in the future. Both the chart and the table assume the reinvestment of dividends and distributions. The bar chart does not reflect the deduction of applicable sales charges for Class A Shares. If sales charges had been reflected, the returns for Class A Shares would be less than those shown below. The Fund is the successor to Highland Floating Rate Advantage Fund, a Delaware statutory trust, a closed-end interval fund with substantially similar investment objective, strategies, and policies (the &#8220;Predecessor Fund&#8221;). <b>The performance of the Fund&#8217;s Class A, Class B, Class C and Class Z Shares provided in the chart and the table is that of the Predecessor Fund for all periods prior to June 13, 2011. </b>Updated information on the Fund&#8217;s performance can be obtained by visiting https://www.highlandfunds.com/Funds&#8212;&#8212;&#8212;Performance/Mutual-Funds/Alternative-Investment/Floating-Rate-Opportunities or by calling 1-877-665-1287.The bar chart and the performance table below provide an indication of the risks of investing in the Fund by showing changes in the performance of the Fund&#8217;s Class A Shares for the most recent calendar year and by showing how the Fund&#8217;s average annual returns for the Fund&#8217;s Class A, Class C and Class Z Shares compared to those of a broad measure of market performance.0.0035Annual Total Return<br/>(As of December 31 for Class A Shares)1-877-665-1287https://www.highlandfunds.com/Funds&#8212;&#8212;&#8212;Performance/Mutual-Funds/Alternative-Investment/Long-Short-HealthcareAs with all mutual funds, the Fund&#8217;s past performance (before and after taxes) does not predict how the Fund will perform in the future.0.21720.07420.0770.1078-0.0114-0.44340.22720.08120.02930.17322701231953The bar chart does not reflect the deduction of applicable sales charges for Class A Shares. If sales charges had been reflected, the returns for Class A Shares would be less than those shown below.2110165943683534After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes.Actual after-tax returns depend on an investor&#8217;s tax situation and may differ from those shown. For example, after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.After-tax returns in the table above are shown for Class A Shares only and will differ for Class C and Class Z Shares.The highest calendar quarter total return for Class A Shares of the Fund was 12.03% for the quarter ended September 30, 2009 and the lowest calendar quarter total return was (33.78)% for the quarter ended December 31, 2008.Performance Table<br></br>Annualized Total Returns for the period ended December 31, 2012 (sales charge included)Total Annual Fund Operating Expenses differ from the ratio of expenses to average net assets shown in the Financial Highlights, which reflect the operating expenses of the Fund and do not include acquired fund fees and expenses.0.13170.11050.08470.13660.15740.17760.0943-0.0295-0.0505-0.0374-0.0275-0.0275-0.01950.04810.02870.00530.01110.02950.02730.03590.0553October 31, 2014464After-tax returns in the table above are shown for Class A Shares only and will differ for Class B, Class C and Class Z Shares. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor&#8217;s tax situation and may differ from those shown. For example, after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.You may qualify for sales charge discounts on purchases of Class A Shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund.50000highest calendar quarter total returnOctober 31, 20140.712009-12-31When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund.0.1625lowest calendar quarter total return<b>Non-Diversification Risk</b>. As a non-diversified fund for the purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund.2009-03-31-0.1178An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency.The bar chart and the performance table below provide an indication of the risks of investing in the Fund by showing changes in the performance of the Fund&#8217;s Class A Shares from year to year and by showing how the Fund&#8217;s average annual returns for the Fund&#8217;s Class A, Class B, Class C and Class Z Shares compared to those of a broad measure of market performance.year-to-date total return1-877-665-12872013-09-300.1679https://www.highlandfunds.com/Funds&#8212;&#8212;&#8212;Performance/Mutual-Funds/Alternative-Investment/Floating-Rate-OpportunitiesAs with all mutual funds, the Fund&#8217;s past performance (before and after taxes) does not predict how the Fund will perform in the future.The bar chart does not reflect the deduction of applicable sales charges for Class A Shares. If sales charges had been reflected, the returns for Class A Shares would be less than those shown below.(sales charge included)After-tax returns in the table above are shown for Class A Shares only and will differ for Class B, Class C and Class Z Shares.After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes.Actual after-tax returns depend on an investor&#8217;s tax situation and may differ from those shown. For example, after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.year-to-date total return2013-09-300.0181highest calendar quarter total return2009-09-300.1203lowest calendar quarter total return2008-12-31-0.3378<div style="display:none">~ http://www.highlandfunds.com/role/ScheduleExpenseExampleTransposedHighlandLongShortHealthcareFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleExpenseExampleNoRedemptionTransposedHighlandLongShortHealthcareFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAnnualTotalReturnsHighlandLongShortHealthcareFundBarChart column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAverageAnnualTotalReturnsTransposedHighlandLongShortHealthcareFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleShareholderFeesHighlandLongShortHealthcareFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAnnualFundOperatingExpensesHighlandLongShortHealthcareFund column period compact * ~</div>0.00450.0117-0.0107564067801831The Fund will, under normal circumstances, invest at least 80% of its assets (the &#8220;80% basket&#8221;) in component securities of the Underlying Index (&#8220;Component Securities&#8221;). The Fund may invest the remaining 20% of its assets (the &#8220;20% basket&#8221;) in securities not included in the Underlying Index, but which Highland Capital Management Funds Advisor, L.P. (&#8220;HCMFA&#8221; or the &#8220;Adviser&#8221;) believes will help the Fund track the Underlying Index. For example, the Fund may invest in securities that are not components of the Underlying Index to reflect various corporate actions (such as mergers) and other changes in the Underlying Index (such as reconstitutions, additions and deletions). The Fund may invest in securities of any type and of companies of any market capitalization, market sector or industry. The Fund may use the 20% basket to invest in securities issued by other investment companies, including other exchange-traded funds. The Fund also may invest in derivatives to track the Underlying Index, such as futures contracts, options on futures contracts, options, and swaps with the 20% basket. In addition, the Fund&#8217;s 20% basket may be invested in cash and cash equivalents, including shares of money market funds advised by the Adviser or its affiliates.<br/><br/>Unlike many investment companies, the Fund does not try to &#8220;beat&#8221; the index it tracks. The Fund uses a passive management strategy designed to track the total return performance of the Underlying Index as a proxy for the senior secured loan universe. The Underlying Index is a subset of the Markit iBoxx USD Leveraged Loan Index. &#8220;Leveraged Loans&#8221; are loans to companies that typically already have a high amount of debt and are often characterized by lower credit ratings or higher interest rates. The Underlying Index is a rules-based index consisting of some of the largest, most liquid Leveraged Loans, as measured by the number of active market participants trading the security and the dollar face amount of outstanding senior loans issued. Currently, loans eligible for inclusion in the Underlying Index are measured by type, size, liquidity, spread, credit rating and minimum time to maturity.<br/><br/>The Underlying Index is sponsored by Markit Indices Limited (the &#8220;Index Provider&#8221;), an organization that is independent of the Fund and the Adviser. The Index Provider determines the composition and relative weightings of the securities in the Underlying Index and publishes information regarding the market value of the Underlying Index.<br/><br/>The Adviser uses a representative sampling indexing strategy to manage the Fund. &#8220;Representative sampling&#8221; is an indexing strategy that involves investing in a representative sample of securities that collectively has an investment profile similar to the Underlying Index. The securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability, duration, maturity or credit ratings and yield) and liquidity measures similar to those of the Underlying Index. The Fund may or may not hold all of the securities in the Underlying Index. &#8220;Tracking error&#8221; is the difference between the performance (return) of the Fund&#8217;s portfolio and that of the Underlying Index. The Adviser expects that, over time, the Fund&#8217;s tracking error will not exceed 5%. Funds that employ a representative sampling strategy may incur tracking error risk to a greater extent than funds that seek to replicate an index.<br/><br/>The Component Securities primarily consist of senior loans (&#8220;Senior Loans&#8221;) to domestic or foreign corporations, partnerships and other entities that operate in a variety of industries and geographic regions (&#8220;Borrowers&#8221;). The Fund will, under normal circumstances, invest at least 80% of its assets (i.e., net assets plus borrowings for investment purposes) in Senior Loans. Senior Loans, at the time of the Fund&#8217;s purchase, have the most senior position in a Borrower&#8217;s capital structure or share the senior position with other senior debt securities of the Borrower. Senior Loans generally are arranged through private negotiations between a Borrower and several financial institutions (the &#8220;Lenders&#8221;) represented in each case by one or more such Lenders acting as agent (the &#8220;Agent&#8221;) of the several Lenders. On behalf of the Lenders, the Agent is primarily responsible for negotiating the loan agreement (&#8220;Loan Agreement&#8221;) that establishes the relative terms and conditions of the Senior Loan and rights of the Borrower and the Lenders. The Component Securities in which the Fund will invest are expected to be below investment grade securities (also known as &#8220;high yield securities&#8221; or &#8220;junk securities&#8221;). Such securities are rated below investment grade by a nationally recognized statistical rating organization (&#8220;NRSRO&#8221;) or are unrated but deemed by the Adviser to be of comparable quality. The Underlying Index may include, and the Fund may acquire and retain in its portfolio, below investment grade or unrated securities, including loans of Borrowers that are insolvent or in default, provided that all criteria of the Underlying Index, including liquidity requirements, are met.<br/><br/>The Fund may invest in participations (&#8220;Participations&#8221;) in Senior Loans and may purchase assignments (&#8220;Assignments&#8221;) of portions of Senior Loans from third parties. Senior Loans often are secured by specific assets of the Borrower, although the Fund may invest without limitation in Senior Loans that are not secured by any collateral.<br/><br/>The Fund is non-diversified as defined in the Investment Company Act of 1940, as amended (the &#8220;1940 Act&#8221;), but it intends to seek to qualify as a regulated investment company (&#8220;RIC&#8221;) under Subchapter M of the Internal Revenue Code of 1986, as amended (the &#8220;Code&#8221;), which imposes diversification requirements on the Fund that are different from, and generally less restrictive than, the requirements applicable to &#8220;diversified&#8221; investment companies under the 1940 Act. The Fund is not intended to be a complete investment program.When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund. No assurance can be given that the Fund will achieve its objective, and investment results may vary substantially over time and from period to period. An investment in the Fund is not appropriate for all investors.<br/><br/><b>Asset Class Risk.</b> Securities in the Underlying Index or in the Fund&#8217;s portfolio may underperform in comparison to the general securities markets or other asset classes.<br/><br/><b>Cash Transaction Risk.</b> Unlike most exchange-traded funds (&#8220;ETFs&#8221;), the Fund currently intends to effect creations and redemptions principally for cash, rather than principally for in-kind securities, because of the nature of the Fund&#8217;s investments. As a result, investments in Fund shares may be less tax-efficient than investments in conventional ETFs.<br/><br/><b>Counterparty Risk.</b> A counterparty (the other party to a transaction or an agreement or the party with whom the Fund executes transactions) to a transaction with the Fund may be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations.<br/><br/><b>Credit Risk.</b> The issuers of certain securities or the counterparties of a derivatives contract or repurchase contract might be unable or unwilling (or perceived as being unable or unwilling) to make interest and/or principal payments when due, or to otherwise honor its obligations. Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Fund&#8217;s Net Asset Value (&#8220;NAV&#8221;) and the market price of the Fund&#8217;s shares.<br/><br/><b>Debt Securities and Leveraged Loans Risk.</b> The value of debt securities typically changes in response to various factors, including, by way of example, market-related factors (such as changes in interest rates or changes in the risk appetite of investors generally) and changes in the actual or perceived ability of the issuer (or of issuers generally) to meet its (or their) obligations. During periods of rising interest rates, debt securities generally decline in value. Conversely, during periods of falling interest rates, debt securities generally rise in value. This kind of market risk is generally greater for funds investing in debt securities with longer maturities. Leveraged Loans are subject to the same risks typically associated with debt securities. In addition, Leveraged Loans, which typically hold a senior position in the capital structure of a borrower, are subject to the risk that a court could subordinate such loans to presently existing or future indebtedness or take other action detrimental to the holders of Leveraged Loans. Leveraged Loans are also especially subject to the risk that the value of the collateral, if any, securing a loan may decline, be insufficient to meet the obligations of the borrower or be difficult to liquidate.<br/><br/><b>Derivatives Risk.</b> Derivatives Risk is a combination of several risks, including the risks that: (1) an investment in a derivative instrument may not correlate well with the performance of the securities or asset class to which the Fund seeks exposure, (2) derivative contracts, including options, may expire worthless and the use of derivatives may result in losses to the Fund, (3) a derivative instrument entailing leverage may result in a loss greater than the principal amount invested, (4) derivatives not traded on an exchange may be subject to credit risk, for example, if the counterparty does not meet its obligations (see also &#8220;Counterparty Risk&#8221;), and (5) derivatives not traded on an exchange may be subject to liquidity risk and the related risk that the instrument is difficult or impossible to value accurately. As a general matter, when the Fund establishes certain derivative instrument positions, such as certain futures and options contract positions, it will segregate liquid assets (such as cash, U.S. Treasury bonds or commercial paper) equivalent to the Fund&#8217;s outstanding obligations under the contract or in connection with the position. In addition, recent legislation has called for a new regulatory framework for the derivatives market. The impact of the new regulations are still unknown, but has the potential to increase the costs of using derivatives, may limit the availability of some forms of derivatives or the Fund&#8217;s ability to use derivatives, and may adversely affect the performance of some derivative instruments used by the Fund as well as the Fund&#8217;s ability to pursue its investment objective through the use of such instruments.<br/><br/><b>Exchange-Traded Funds Risk.</b> The price movement of an exchange-traded fund may not exactly track the underlying index and may result in a loss. In addition, shareholders bear both their proportionate share of the Fund&#8217;s expenses and similar expenses of the underlying investment company when the Fund invests in shares of another investment company.<br/><br/><b>Focused Investment Risk.</b> The Fund&#8217;s investments in Senior Loans arranged through private negotiations between a Borrower and several financial institutions may expose the Fund to risks associated with the financial services industry. The financial services industry is subject to extensive government regulation, which can limit both the amounts and types of loans and other financial commitments financial services companies can make and the interest rates and fees they can charge. Profitability is largely dependent on the availability and cost of capital funds, and can fluctuate significantly when interest rates change. Because financial services companies are highly dependent on short-term interest rates, they can be adversely affected by downturns in the U.S. and foreign economies or changes in banking regulations. Losses resulting from financial difficulties of Borrowers can negatively affect financial services companies.<br/><br/><b>High-Yield Debt Securities Risk.</b> Below investment grade securities or unrated securities of similar credit quality (commonly known as &#8220;high-yield securities&#8221; or &#8220;junk securities&#8221;) are more likely to default than higher rated securities. The Fund&#8217;s ability to invest in high-yield debt securities generally subjects the Fund to greater risk than securities with higher ratings. Such securities are regarded by the rating organizations as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. The market value of these securities is more sensitive to corporate developments and economic conditions and can be volatile. Market conditions can diminish liquidity and make accurate valuations difficult to obtain.<br/><br/><b>Illiquid Securities Risk.</b> The Adviser may not be able to sell illiquid securities at the price it would like or may have to sell them at a loss. Securities of non-U.S. issuers and emerging markets securities in particular, are subject to greater liquidity risk.<br/><br/><b>Industry Concentration Risk.</b> Because the Fund may invest 25% or more of the value of its assets in an industry or group of industries to the extent that the Underlying Index concentrates in an industry or group of industries, the Fund&#8217;s performance largely depends on the overall condition of such industry or group of industries and the Fund is susceptible to economic, political and regulatory risks or other occurrences associated with that industry or group of industries.<br/><br/><b>Intellectual Property Risk.</b> The Adviser relies on a license, which may be terminated by the Index Provider, that permits the Fund to use the Underlying Index and associated trade names, trademarks and service marks (the &#8220;Intellectual Property&#8221;) in connection with the name and investment strategies of the Fund.<br/><br/><b>Interest Rate Risk.</b> When interest rates decline, the value of fixed rate securities already held by the Fund can be expected to rise. Conversely, when interest rates rise, the value of existing fixed rate portfolio securities can be expected to decline. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration.<br/><br/><b>Lender Liability Risk.</b> A number of judicial decisions have upheld the right of Borrowers to sue lending institutions on the basis of various evolving legal theories founded upon the premise that an institutional Lender has violated a duty of good faith and fair dealing owed to the Borrower or has assumed a degree of control over the Borrower resulting in a creation of a fiduciary duty owed to the Borrower or its other creditors or shareholders. Because of the nature of certain of the Fund&#8217;s investments, the Fund or the Adviser could be subject to such liability.<br/><br/><b>Limited Information Risk.</b> The types of Senior Loans in which the Fund will invest historically may not have been rated by a NRSRO, have not been registered with the SEC or any state securities commission, and have not been listed on any national securities exchange. Although the Fund will generally have access to financial and other information made available to the Lenders in connection with Senior Loans, the amount of public information available with respect to Senior Loans will generally be less extensive than that available for rated, registered or exchange-listed securities.<br/><br/><b>Liquidity Risk.</b> Liquidity risk is the risk that low trading volume, lack of a market maker, large position size, or legal restrictions (including daily price fluctuation limits or &#8220;circuit breakers&#8221;) limits or prevents the Fund from selling particular securities or unwinding derivative positions at desirable prices. At times, a major portion of any portfolio security may be held by relatively few institutional purchasers. Even if the Fund considers such securities liquid because of the availability of an institutional market, such securities may become difficult to value or sell in adverse market or economic conditions.<br/><br/><b>Loan Participation Risk.</b> In addition to the risks typically associated with debt securities, Participations involve the risk that there may not be a readily available market for Participation interests and, in some cases, the Fund may have to dispose of such securities at a substantial discount from face value. Participations also involve the credit risk associated with the underlying corporate borrower.<br/><br/><b>Management Risk.</b> The Fund relies on the Adviser&#8217;s ability to achieve its investment objective. The Adviser may be incorrect in its assessment of the intrinsic value of companies whose securities the Fund holds, which may result in a decline in the value of Fund shares and failure to achieve its investment objective. The Fund&#8217;s portfolio manager uses qualitative analyses and/or models. Any imperfections or limitations in such analyses and models could affect the ability of the portfolio manager to implement strategies.<br/><br/><b>Market Price Variance Risk.</b> Fund shares will be listed for trading on NYSE Arca, Inc. (the &#8220;Exchange&#8221;) and can be bought and sold in the secondary market at market prices. The market prices of shares will fluctuate in response to changes in the NAV and supply and demand for shares. The Adviser cannot predict whether shares will trade above, below or at their NAV. Given the fact that shares can be created and redeemed in Creation Units, the Adviser believes that large discounts or premiums to the NAV of shares should not be sustained. The Fund&#8217;s investment results are measured based upon the daily NAV of the Fund. Investors purchasing and selling shares in the secondary market may not experience investment results consistent with those experienced by those creating and redeeming directly with the Fund.<br/><br/><b>Non-Diversification Risk.</b> As a non-diversified fund for purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund.<br/><br/><b>Non-Payment Risk.</b> Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Fund&#8217;s NAV and the market price of the Fund&#8217;s shares.<br/><br/><b>Ongoing Monitoring Risk.</b> On behalf of the several Lenders, the Agent generally will be required to administer and manage the Senior Loans and, with respect to collateralized Senior Loans, to service or monitor the collateral. Financial difficulties of Agents can pose a risk to the Fund. Unless, under the terms of the loan, the Fund has direct recourse against the Borrower, the Fund may have to rely on the Agent or other financial intermediary to apply appropriate credit remedies against a Borrower.<br/><br/><b>Options Risk.</b> Options, such as covered calls and covered puts, are subject to the risk that significant differences between the securities and options markets that could result in an imperfect correlation between these markets.<br/><br/><b>Passive Investment Risk.</b> The Fund is not actively managed and HCMFA does not attempt to take defensive positions under any market conditions, including during declining markets.<br/><br/><b>Prepayment Risk.</b> During periods of falling interest rates, issuers of debt securities may repay higher rate securities before their maturity dates. This may cause the Fund to lose potential price appreciation and to be forced to reinvest the unanticipated proceeds at lower interest rates. This may result in a decrease in the Fund&#8217;s income.<br/><br/><b>Regulatory Risk.</b> To the extent that legislation or state or federal regulators impose additional requirements or restrictions with respect to the ability of financial institutions to make loans in connection with highly leveraged transactions, the availability of Senior Loan interests for investment by the Fund may be adversely affected.<br/><br/><b>Securities Market Risk.</b> The value of securities owned by the Fund may go up or down, sometimes rapidly or unpredictably, due to factors affecting particular companies or the securities markets generally. A general downturn in the securities market may cause multiple asset classes to decline in value simultaneously. Many factors can affect this value and you may lose money by investing in the Fund.<br/><br/><b>Senior Loans Risk.</b> The risks associated with Senior Loans are similar to the risks of below investment grade securities. Senior Loans and other debt securities are also subject to the risk of price declines and to increases in prevailing interest rates. The Fund&#8217;s investments in Senior Loans are typically below investment grade and are considered speculative because of the credit risk of their issuers. The secondary market for loans is generally less liquid than the market for higher grade debt. Less liquidity in the secondary trading market could adversely affect the price at which the Fund could sell a loan, and could adversely affect the Fund&#8217;s income. The volume and frequency of secondary market trading in such loans varies significantly over time and among loans. Although Senior Loans in which the Fund will invest will often be secured by collateral, there can be no assurance that liquidation of such collateral would satisfy the Borrower&#8217;s obligation in the event of a default or that such collateral could be readily liquidated.<br/><br/><b>Tracking Error Risk.</b> The performance of the Fund may diverge from that of the Underlying Index. Because the Fund employs a representative sampling strategy, the Fund may experience tracking error to a greater extent than a fund that seeks to replicate an index. The Adviser may not be able to cause the Fund&#8217;s performance to correlate to that of the Fund&#8217;s benchmark, either on a daily or aggregate basis. Because the Underlying Index rebalances monthly but the Fund is not obligated to do the same, the risk of tracking error may increase following the rebalancing of the Underlying Index.<br/><br/>An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. As with any investment company, there is no guarantee that the Fund will achieve its goal.Highland/iBoxx Senior Loan ETFInvestment ObjectiveThe investment objective of Highland/iBoxx Senior Loan ETF (the &#8220;Fund&#8221;) is to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Markit iBoxx USD Liquid Leveraged Loan Index (the &#8220;Underlying Index&#8221;).Fees and ExpensesThe following tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.Annual Fund Operating Expenses (expenses that you pay each year as % of the value of your investment)0.01620.00550.055000.02250.02250.02250.00350.0100.01190.01230.01290.00530.00560.00580.00080.00080.0008801155923334347-0.01470.01260.0241-0.0240.00810.0182-0.00960.00820.01730.02820.01840.02790.04570.02750.0369Expense Example.This Example helps you compare the cost of investing in the Fund to the cost of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell or redeem all your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund&#8217;s operating expenses, which exclude brokerage commissions, remain the same. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.October 31, 2014Portfolio TurnoverThe Fund pays transaction costs, such as commissions, when it buys and sells securities (or &#8220;turns over&#8221; its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund&#8217;s performance. For the period from November 6, 2012 (commencement of operations) through June 30, 2013, the Fund&#8217;s turnover rate was 38%.<div style="display:none">~ http://www.highlandfunds.com/role/ScheduleExpenseExampleNoRedemptionTransposedHighlandFloatingRateOpportunitiesFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAnnualTotalReturnsHighlandFloatingRateOpportunitiesFundBarChart column period compact * ~</div>(sales charge included)Principal Investment Strategies0.38Highland Long/Short Equity Fund<br></br><b>(formerly &#8220;Pyxis Long/Short Equity Fund&#8221;)</b>Investment ObjectiveThe investment objective of Highland Long/Short Equity Fund (&#8220;Long/Short Equity Fund&#8221; or the &#8220;Fund&#8221;) is to seek consistent, above-average total returns primarily through capital appreciation, while also attempting to preserve capital and mitigate risk through hedging activities.Principal RisksFees and Expenses for Class A, Class C and Class Z SharesThe following tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts on purchases of Class A Shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund. More information about these and other discounts is available from your financial intermediary and in &#8220;Shareowner Guide &#8212; How to Invest in the Highland Funds &#8212; Sales Charges &#8212; Class A Shares&#8221; on page 43 of the Fund&#8217;s Prospectus and in &#8220;Programs for Reducing or Eliminating Sales Charges&#8221; on page 58 of the Fund&#8217;s Statement of Additional Information.Shareholder Fees (fees paid directly from your investment)000Performance00.010The Fund commenced operations on November 6, 2012. After the Fund has had operations for at least one full calendar year, its Prospectus will include a bar chart and a table that will provide an indication of the risks of investing in the Fund by showing how the Fund has performed and how its performance has varied from year to year. Although past performance of the Fund is no guarantee of how it will perform in the future, historical performance may give you some indication of the risks of investing in the Fund.000000<div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAnnualFundOperatingExpensesHighlandiBoxxSeniorLoanETF column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleExpenseExampleTransposedHighlandiBoxxSeniorLoanETF column period compact * ~</div>When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund.<b>Non-Diversification Risk.</b> As a non-diversified fund for purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund.An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency.After the Fund has had operations for at least one full calendar year, its Prospectus will include a bar chart and a table that will provide an indication of the risks of investing in the Fund by showing how the Fund has performed and how its performance has varied from year to year.Although past performance of the Fund is no guarantee of how it will perform in the future, historical performance may give you some indication of the risks of investing in the Fund.The Fund commenced operations on November 6, 2012. After the Fund has had operations for at least one full calendar year, its Prospectus will include a bar chart and a table that will provide an indication of the risks of investing in the Fund by showing how the Fund has performed and how its performance has varied from year to year.Annual Fund Operating Expenses (expenses that you pay each year as % of the value of your investment)0.00660.00670.00710.03870.04560.03620.02620.03310.0237Highland Floating Rate Opportunities Fund<br></br><b>(formerly &#8220;Pyxis Floating Rate Opportunities Fund&#8221;)</b>-0.0125-0.0125-0.0125Expense ExampleThis Example helps you compare the cost of investing in the Fund to the cost of investing in other mutual funds. The Example assumes that (i) you invest $10,000 in the Fund for the time periods indicated and then sell or redeem all your shares at the end of those periods, (ii) your investment has a 5% return each year, and (iii) operating expenses remain the same, except that the example is based on the Total Annual Fund Operating Expenses After Management Fee Waiver for the first year and on the Total Annual Operating Expenses for the remaining years. Your actual costs may be higher or lower.24099317683800434126622064591334126622064591Portfolio TurnoverThe Fund pays transaction costs, such as commissions, when it buys and sells securities (or &#8220;turns over&#8221; its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the expense example, affect the Fund&#8217;s performance. During the most recent fiscal year, the Fund&#8217;s portfolio turnover rate was 706% of the average value of its portfolio.Principal Investment StrategiesThe Fund invests, under normal circumstances, at least 80% of the value of its total assets (net assets plus the amount of any borrowings for investment purposes) in equity securities. Equity securities of U.S. or non-U.S. issuers in which the Fund may invest include common stocks, preferred stocks, convertible securities, depositary receipts, warrants to buy common stocks and derivatives on any of the foregoing securities. The Fund may invest in equity securities of issuers of any market capitalization and the Fund may invest in securities issued by other investment companies, including exchange-traded funds (&#8220;ETFs&#8221;). The Fund will generally take long and short positions in equity securities and the Adviser will vary the Fund&#8217;s long-short exposure over time based on its assessment of market conditions and other factors. This is not a market-neutral strategy. In addition, the Fund may invest up to 20% of the value of its assets in a wide variety of other U.S. and non-U.S. non-equity securities and financial instruments, including but not limited to bonds and other debt securities, money market instruments, illiquid securities, cash and cash equivalents. The Fund may invest up to 50% of the value of its total assets in securities of non-U.S. issuers, including emerging market issuers. Such securities may be denominated in U.S. dollars, non-U.S. currencies or multinational currency units. The reference in the Fund&#8217;s investment objective to capital preservation does not indicate that the Fund may not lose money. The investment adviser seeks to employ strategies that are consistent with capital preservation, but there can be no assurance that the investment adviser will be successful in doing so. <br /><br />Derivatives, which are instruments that have a value based on another instrument, exchange rate or index, may be used as substitutes for securities in which the Fund can invest. The Fund may use derivatives, including options, futures, forwards and swaps (including credit default swaps) as tools in the management of portfolio assets. The Fund may use derivatives, such as options and foreign currency transactions, to hedge various investments for risk management and for income enhancement, which is also known as speculation. The Fund may invest in derivative instruments, including for hedging and speculative purposes, to the extent permitted by the Investment Company Act of 1940, as amended (the &#8220;1940 Act&#8221;). <br /><br />The Fund may borrow an amount up to 33 1/3% (or such other percentage permitted by law) of its total assets (including the amount borrowed) less all liabilities other than borrowings. The Fund may borrow for investment purposes, to meet redemption requests and for temporary, extraordinary or emergency purposes. The use of borrowing for investment purposes (i.e., leverage) increases both investment opportunity and investment risk. In addition, the Fund may seek additional income by making secured loans of its portfolio securities. <br /><br />The Fund&#8217;s investment strategy utilizes a variety of methods to evaluate long and short equity investments of various market capitalizations to find securities that the Adviser believes offer the potential for capital gains. As part of this strategy, the Adviser seeks to invest in industries, sectors and securities that it believes are more attractive on either a relative basis or on an absolute basis. In addition to purchasing, or taking &#8220;long&#8221; positions in equity securities, the Fund&#8217;s investment strategy includes short selling, and may include investments in derivatives, ETFs, and/or fixed income securities. <br /><br />The Adviser seeks to invest in the common equity of companies that the Adviser believes are trading below their intrinsic value. To do so, the Adviser will typically perform fundamental investment analysis, which may involve comparing the value of the company&#8217;s common equity to that of its: (a) historical and/or expected cash flows; (b) historical and/or expected growth rates; (c) historical and/or expected strategic positioning; and (d) historical and/or current valuation on an absolute basis or relative to its industry, the overall market and/or historical valuation levels. The Adviser may purchase securities of a company that the Adviser believes: (i) is undervalued relative to normalized business and industry fundamentals or to the expected growth that the Adviser believes the company will achieve; (ii) has assets not fully valued by the marketplace; (iii) is experiencing strong underlying secular growth trends or strong visibility into growth prospects; (iv) has earnings estimates that the Adviser believes are too low or has the potential for long-term earnings growth; (v) has strong competitive barriers to entry; (vi) is experiencing strong business fundamentals; (vii) has a strong management team; (viii) will see increased multiple expansion or will benefit from sustainable economic dynamics; and/or (ix) may be subject to an identifiable catalyst that the Adviser believes will unlock value. The Adviser will typically focus on companies that are exhibiting one or more of these indicators. Technical analysis may also be used to help in the decision making process. <br /><br />In selecting investments for long positions of the Fund, the Adviser focuses on issuers that it believes: (i) have strong, free cash flow and pay regular dividends; (ii) have potential for long-term earnings per share growth; (iii) may be subject to a value catalyst, such as industry developments, regulatory changes, changes in management, sale or spinoff of a division or the development of a profitable new business; (iv) are well-managed; and (v) will benefit from sustainable long-term economic dynamics, such as globalization of an issuer&#8217;s industry or an issuer&#8217;s increased focus on productivity or enhancement of services. <br /><br />The Adviser may sell short securities of a company that the Adviser believes: (i) is overvalued relative to normalized business and industry fundamentals or to the expected growth that the Adviser believes the company will achieve; (ii) has a faulty business model; (iii) engages in questionable accounting practices; (iv) shows declining cash flow and/or liquidity; (v) has earnings estimates which the Adviser believes are too high; (vi) has weak competitive barriers to entry; (vii) suffers from deteriorating industry and/or business fundamentals; (viii) has a weak management team; (ix) will see multiple contraction; (x) is not adapting to changes in technological, regulatory or competitive environments; or (xi) provides a hedge against the Fund&#8217;s long exposure, such as a broad based market ETF. Technical analysis may be used to help in the decision making process. <br /><br />The Adviser generates investment ideas from a variety of different sources. These include, but are not limited to, screening software using both fundamental and technical factors, industry and company contacts, consultants, company press releases, company conference calls, buy-side contacts, sell-side contacts, brokers, third-party research, independent research of financial and corporate information, and news services. The Adviser will make investment decisions based on its analysis of a security&#8217;s value, and will also take into account its view of macroeconomic conditions and industry trends. The Adviser will make investments without regard to a company&#8217;s level of capitalization or the tax consequences of the investment (short or long term capital gains). <br /><br />Once an investment opportunity is determined to be attractive as a stand-alone investment, the Adviser will evaluate the effect of adding that investment to the Fund&#8217;s portfolio. In doing so, the Adviser will seek to minimize the market-related portfolio volatility as well as the risk of a capital loss by hedging such risks primarily by short selling, and, to a lesser extent, through the use of derivatives. <br /><br />The Fund is non-diversified as defined in the 1940 Act. The Fund is not intended to be a complete investment program.Principal RisksWhen you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund. No assurance can be given that the Fund will achieve its objective, and investment results may vary substantially over time and from period to period. An investment in the Fund is not appropriate for all investors. <br /><br /><b>Counterparty Risk.</b> A counterparty (the other party to a transaction or an agreement or the party with whom the Fund executes transactions) to a transaction with the Fund may be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations. <br /><br /><b>Credit Risk.</b> The issuers of certain securities or the counterparties of a derivatives contract or repurchase contract might be unable or unwilling (or perceived as being unable or unwilling) to make interest and/or principal payments when due, or to otherwise honor its obligations. Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Net Asset Value (&#8220;NAV&#8221;) of the Fund. <br /><br /><b>Currency Risk.</b> Fluctuations in exchange rates will adversely affect the value of the Fund&#8217;s foreign currency holdings and investments denominated in foreign currencies. <br /><br /><b>Debt Securities Risk.</b> The value of debt securities typically changes in response to various factors, including, by way of example, market-related factors (such as changes in interest rates or changes in the risk appetite of investors generally) and changes in the actual or perceived ability of the issuer (or of issuers generally) to meet its (or their) obligations. During periods of rising interest rates, debt securities generally decline in value. Conversely, during periods of falling interest rates, debt securities generally rise in value. This kind of market risk is generally greater for Funds investing in debt securities with longer maturities. <br /><br /><b>Derivatives Risk.</b> Derivatives Risk is a combination of several risks, including the risks that: (1) an investment in a derivative instrument may not correlate well with the performance of the securities or asset class to which the Fund seeks exposure, (2) derivative contracts, including options, may expire worthless and the use of derivatives may result in losses to the Fund, (3) a derivative instrument entailing leverage may result in a loss greater than the principal amount invested, (4) derivatives not traded on an exchange may be subject to credit risk, for example, if the counterparty does not meet its obligations (see also &#8220;Counterparty Risk&#8221;), and (5) derivatives not traded on an exchange may be subject to liquidity risk and the related risk that the instrument is difficult or impossible to value accurately. As a general matter, when a Fund establishes certain derivative instrument positions, such as certain futures, options and forward contract positions, it will segregate liquid assets (such as cash, U.S. Treasury bonds or commercial paper) equivalent to the Fund&#8217;s outstanding obligations under the contract or in connection with the position. In addition, recent legislation has called for a new regulatory framework for the derivatives market. The impact of the new regulations are still unknown, but has the potential to increase the costs of using derivatives, may limit the availability of some forms of derivatives or the Fund&#8217;s ability to use derivatives, and may adversely affect the performance of some derivative instruments used by the Fund as well as the Fund&#8217;s ability to pursue its investment objective through the use of such instruments. <br /><br /><b>Emerging Markets Risk.</b> Investing in securities of issuers tied economically to emerging markets entails all of the risks of investing in securities of non-U.S. issuers detailed below under &#8220;Non-U.S. Securities Risk&#8221; to a heightened degree. These heightened risks include: (i) greater risks of expropriation, confiscatory taxation, nationalization, and less social, political and economic stability; (ii) the smaller size of the markets for such securities and a lower volume of trading, resulting in lack of liquidity and in price volatility; (iii) greater fluctuations in currency exchange rates; and (iv) certain national policies that may restrict a Fund&#8217;s investment opportunities, including restrictions on investing in issuers or industries deemed sensitive to relevant national interests. <br /><br /><b>Equity Securities Risk.</b> Because it purchases common stocks and other equity securities, the Fund is subject to the risk that stock prices will fall over short or long periods of time. In addition, common stocks represent a share of ownership in a company, and rank after bonds and preferred stock in their claim on the company&#8217;s assets in the event of bankruptcy. <br /><br /><b>ETF Risk.</b> The price movement of an ETF may not exactly track the underlying index and may result in a loss. In addition, shareholders bear both their proportionate share of the Fund&#8217;s expenses and similar expenses of the underlying investment company when the Fund invests in shares of another investment company. <br /><br /><b>Hedging Risk.</b> Although intended to limit or reduce investment risk, hedging strategies may also limit or reduce the potential for profit. There is no assurance that hedging strategies will be successful. <br /><br /><b>Illiquid and Restricted Securities Risk.</b> The Adviser may not be able to sell illiquid or restricted securities at the price it would like or may have to sell them at a loss. Securities of non-U.S. issuers and emerging markets securities in particular, are subject to greater liquidity risk. <br /><br /><b>Interest Rate Risk. </b>When interest rates decline, the value of fixed rate securities already held by the Fund can be expected to rise. Conversely, when interest rates rise, the value of existing fixed rate portfolio securities can be expected to decline. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration. <br /><br /><b>Leverage Risk.</b> The Fund is authorized to borrow in an amount up to 33 1/3% of its total assets (including the amount borrowed). The use of leverage for investment purposes creates opportunities for greater total returns, but at the same time involves risks. Any investment income or gains earned with respect to the amounts borrowed that are in excess of the interest that is due on the borrowing will augment the Fund&#8217;s income. Conversely, if the investment performance with respect to the amounts borrowed fails to cover the interest on such borrowings, the value of the Fund&#8217;s shares may decrease more quickly than would otherwise be the case. Interest payments and fees incurred in connection with such borrowings will reduce the amount of net income available for payment to Fund shareholders. <br /><br /><b>Management Risk.</b> The Fund relies on the Adviser&#8217;s ability to achieve its investment objective. The Adviser may be incorrect in its assessment of the intrinsic value of companies whose securities the Fund holds, which may result in a decline in the value of Fund shares and failure to achieve its investment objective. The Fund&#8217;s portfolio managers use qualitative analyses and/or models. Any imperfections or limitations in such analyses and models could affect the ability of the portfolio managers to implement strategies. <br /><br /><b>Mid-Cap Company Risk. </b>Investing in securities of mid-cap companies may entail greater risks than investments in larger, more established companies. Mid-cap companies tend to have more narrow product lines, more limited financial resources and a more limited trading market for their stocks, as compared with larger companies. As a result, their stock prices may decline significantly as market conditions change. <br /><br /><b>Non-Diversification Risk.</b> As a non-diversified fund for the purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund. <br /><br /><b>Non-U.S. Securities Risk.</b> Investments in securities of non-U.S. issuers involve certain risks not involved in domestic investments (for example, fluctuations in foreign exchange rates (for non-U.S. securities not denominated in U.S. dollars); future foreign economic, financial, political and social developments; nationalization; exploration or confiscatory taxation; smaller markets; different trading and settlement practices; less governmental supervision; and different accounting, auditing and financial recordkeeping standards and requirements) that may result in the Fund experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies. These risks are magnified for investments in issuers tied economically to emerging markets, the economies of which tend to be more volatile than the economies of developed markets. In addition, certain investments in non-U.S. securities may be subject to foreign withholding taxes on interest, dividends, capital gains or other income. Those taxes will reduce the Fund&#8217;s yield on any such securities. See the &#8220;Taxation&#8221; section below. <br /><br /><b>Portfolio Turnover Risk.</b> High portfolio turnover will increase the Fund&#8217;s transaction costs and may result in increased realization of net short-term capital gains (which are taxable to shareholders as ordinary income when distributed to them), higher taxable distributions and lower after-tax performance. During the last two fiscal years, the Fund has experienced high portfolio turnover rates. <br /><br /><b>Risk of Substantial Redemptions.</b> If substantial numbers of shares in the Fund were to be redeemed at the same time or at approximately the same time, the Fund might be required to liquidate a significant portion of its investment portfolio quickly to meet the redemptions. The Fund might be forced to sell portfolio securities at prices or at times when it would otherwise not have sold them. <br /><br /><b>Securities Lending Risk.</b> The fund may make secured loans of its portfolio securities. Any decline in the value of a portfolio security that occurs while the security is out on loan is borne by the Fund, and will adversely affect performance. Also, there may be delays in recovery of securities loaned, losses in the investment of collateral, and loss of rights in the collateral should the borrower of the securities fail financially while holding the security. <br /><br /><b>Securities Market Risk.</b> The value of securities owned by the Fund may go up or down, sometimes rapidly or unpredictably, due to factors affecting particular companies or the securities markets generally. A general downturn in the securities market may cause multiple asset classes to decline in value simultaneously. Many factors can affect this value and you may lose money by investing in the Fund. <br /><br /><b>Short Sales Risk. </b>This is the risk of loss associated with any appreciation on the price of a security borrowed in connection with a short sale. The Fund may engage in short sales that are not made &#8220;against-the-box&#8221; (as defined under &#8220;Description of Principal Investments&#8221;), which means that the Fund may sell short securities even when they are not actually owned or otherwise covered at all times during the period the short position is open. Short sales that are not made &#8220;against-the-box&#8221; theoretically involve unlimited loss potential since the market price of securities sold short may continuously increase. <br /><br /><b>Small-Cap Company Risk. </b>Investing in the securities of small-cap companies either directly or indirectly through investments in ETFs, closed-end funds or mutual funds (&#8220;Underlying Funds&#8221;) may pose greater market and liquidity risks than larger, more established companies, because of limited product lines and/or operating history, limited financial resources, limited trading markets, and the potential lack of management depth. In addition, the securities of such companies are typically more volatile than securities of larger capitalization companies. <br /><br />An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. As with any mutual fund, there is no guarantee that the Fund will achieve its goal.Risk/Return Bar Chart and TableThe bar chart and the performance table below provide an indication of the risks of investing in the Fund by showing changes in the performance of the Fund&#8217;s Class A Shares from year to year and by showing how the Fund&#8217;s average annual returns for the Fund&#8217;s Class A, Class C and Class Z Shares compared to those of a broad measure of market performance. As with all mutual funds, the Fund&#8217;s past performance (before and after taxes) does not predict how the Fund will perform in the future. Both the chart and the table assume the reinvestment of dividends and distributions. The bar chart does not reflect the deduction of applicable sales charges for Class A Shares. If sales charges had been reflected, the returns for Class A Shares would be less than those shown below. Updated information on the Fund&#8217;s performance can be obtained by visiting https://www.highlandfunds.com/Funds&#8212;&#8212;&#8212;Performance/Mutual-Funds/Alternative-Investment/Long-Short-Equity or by calling 1-877-665-1287.0.0837-0.10480.18070.0467-0.0230.0427The highest calendar quarter total return for Class A Shares of the Fund was 10.42% for the quarter ended September 30, 2009 and the lowest calendar quarter total return was (5.59)% for the quarter ended September 30, 2008.Performance Table<br></br>Annualized Total Returns for the period ended December 31, 2012The Fund invests, under normal circumstances, at least 80% of the value of its total assets (net assets plus any borrowings for investment purposes) in securities of companies principally engaged in the design, development, production, sale, management or distribution of products, services or facilities used for or in connection with healthcare or medicine (&#8220;healthcare companies&#8221;). These healthcare companies include, among others, pharmaceutical firms, medical supply companies, and businesses that operate hospitals and other healthcare facilities, as well as companies engaged in medical, diagnostic, biochemical and other healthcare-related research and development activities. These healthcare companies may also include investment companies, including exchange traded funds (&#8220;ETFs&#8221;). The Fund considers a company &#8220;principally engaged&#8221; in the healthcare industry if (i) it derives at least 50% of its revenues or profits from goods produced or sold, investments made or services performed in the healthcare industry, or (ii) at least 50% of its assets are devoted to such activities. The Fund generally will take long and short positions in securities of healthcare companies and Cummings Bay Capital Management, L.P. (&#8220;CBCM&#8221; or the &#8220;Sub-Adviser&#8221;) will vary the Fund&#8217;s long-short exposure over time based on its assessment of market conditions and other factors.<br/><br/>Although the Fund intends to invest primarily in common stocks of healthcare companies, it may also invest in preferred stocks, warrants, convertible securities, debt securities and other securities issued by such companies. The Fund may invest up to 50% of the value of its total assets in securities of non-U.S. issuers, which may include, without limitation, emerging market issuers. Such securities may be denominated in U.S. dollars, non-U.S. currencies or multinational currency units. In addition, the Fund may invest up to 20% of the value of its total assets in a wide variety of securities and financial instruments, of all kinds and descriptions, issued by non-healthcare companies. The Fund may invest in securities of issuers of any market capitalization. The Fund may invest in securities issued by other investment companies, including ETFs.<br/><br/>Derivatives, which are instruments that have a value based on another instrument, exchange rate or index, may be used as substitutes for securities in which the Fund can invest. The Fund may use derivatives, including futures, forwards, swaps (including credit default swaps), options and foreign currency transactions, as tools in the management of portfolio assets. The Fund may also use derivatives, such as options and foreign currency transactions, to hedge various investments for risk management and for income enhancement, which is also known as speculation. The Fund may invest in derivative instruments, including for hedging and speculative purposes, to the extent permitted by the Investment Company Act of 1940, as amended (the &#8220;1940 Act&#8221;).<br/><br/>The Fund may borrow an amount up to 33 1/3% (or such other percentage permitted by law) of its total assets (including the amount borrowed) less all liabilities other than borrowings. The Fund may borrow for investment purposes, to meet redemption requests and for temporary, extraordinary or emergency purposes. The use of borrowing for investment purposes (i.e., leverage) increases both investment opportunity and investment risk. However, the Fund has no present intention to use borrowing for investment purposes. The Fund may seek additional income by making secured loans on its portfolio securities.<br/><br/>The Fund&#8217;s investment strategy utilizes the analytical models of the Sub-Adviser to evaluate long and short securities of healthcare companies of varying market capitalizations and seeks to identify those securities the Sub-Adviser believes have the greatest potential for capital appreciation. The Sub-Adviser also seeks to take advantage of temporary market inefficiencies in order to boost the overall performance of the Fund.<br/><br/>In selecting investments for long positions of the Fund, the Sub-Adviser focuses on issuers that it believes: (i) have strong, free cash flow and pay regular dividends; (ii) have potential for long-term earnings per share growth; (iii) may be subject to a value catalyst, such as industry developments, regulatory changes, changes in management, sale or spin-off of a division or the development of a profitable new business; (iv) are well-managed; and (v) will benefit from sustainable long-term economic dynamics, such as globalization of demand for an issuer&#8217;s products or an issuer&#8217;s increased focus on productivity or enhancement of services.<br/><br/>The Sub-Adviser may sell short securities of a company that the Sub-Adviser believes: (i) is overvalued relative to normalized business and industry fundamentals or to the expected growth that the Sub-Adviser believes the company will achieve; (ii) has a faulty business model; (iii) engages in questionable accounting practices; (iv) shows declining cash flow and/or liquidity; (v) has earnings estimates which the Sub-Adviser believes are too high; (vi) has weak competitive barriers to entry; (vii) suffers from deteriorating industry and/or business fundamentals; (viii) has a weak management team; (ix) will see multiple contraction; (x) is not adapting to changes in technological, regulatory or competitive environments; or (xi) provides a hedge against the Fund&#8217;s long exposure, such as a broad based market ETF. Technical analysis may be used to help in the decision making process.<br/><br/>The Sub-Adviser generates investment ideas from a variety of different sources. These include, but are not limited to, screening software using both fundamental and technical factors, industry contacts, consultants, company press releases, company conference calls, conversations with company management teams, buy-side contacts, sell-side contacts, brokers, third-party research, independent research of financial and corporate information, third-party research databases, and news services. The Sub-Adviser will make investment decisions based on its analysis of the security&#8217;s value, and will also take into account its view of macroeconomic conditions and healthcare industry trends. The Sub-Adviser will make investments without regard to a company&#8217;s level of capitalization or the tax consequences of the investment (short or long term capital gains).<br/><br/>Once an investment opportunity is determined to be attractive as a stand-alone investment, the Sub-Adviser will evaluate the effect of adding that investment to the Fund&#8217;s portfolio. In doing so, the Sub-Adviser may seek to minimize the market-related portfolio volatility as well as the risk of a capital loss by hedging such risks primarily through the use of options and other derivatives.<br/><br/>The Fund is non-diversified as defined in the 1940 Act. The Fund is not intended to be a complete investment program.0.160.01660.0242006-11-302006-12-052006-12-052006-12-052006-12-052006-12-05After-tax returns in the table above are shown for Class A Shares only and will differ for Class C and Class Z Shares. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor&#8217;s tax situation and may differ from those shown. For example, after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.<br></br>The 1 year average annual return after taxes on distributions and redemptions is higher than the 1 year average annual return after taxes on distributions because of realized losses that would have been sustained upon the sale of fund shares immediately after the relevant periods. The calculations assume that an investor holds the shares in a taxable account, is in the actual historical highest individual federal marginal income tax bracket for each year and would have been able to immediately utilize the full realized loss to reduce his or her federal tax liability. However, actual individual tax results may vary and investors should consult their tax advisers regarding their personal tax situations.When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund. No assurance can be given that the Fund will achieve its objective, and investment results may vary substantially over time and from period to period. An investment in the Fund is not appropriate for all investors.<br/><br/><b>Counterparty Risk.</b> A counterparty (the other party to a transaction or an agreement or the party with whom the Fund executes transactions) to a transaction with the Fund may be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations.<br/><br/><b>Credit Risk.</b> The issuers of certain securities or the counterparties of a derivatives contract or repurchase contract might be unable or unwilling (or perceived as being unable or unwilling) to make interest and/or principal payments when due, or to otherwise honor its obligations. Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Net Asset Value (&#8220;NAV&#8221;) of the Fund.<br/><br/><b>Currency Risk.</b> Fluctuations in exchange rates will adversely affect the value of the Fund&#8217;s foreign currency holdings and investments denominated in foreign currencies.<br/><br/><b>Debt Securities Risk.</b> The value of debt securities typically changes in response to various factors, including, by way of example, market-related factors (such as changes in interest rates or changes in the risk appetite of investors generally) and changes in the actual or perceived ability of the issuer (or of issuers generally) to meet its (or their) obligations. During periods of rising interest rates, debt securities generally decline in value. Conversely, during periods of falling interest rates, debt securities generally rise in value. This kind of market risk is generally greater for Funds investing in debt securities with longer maturities.<br/><br/><b>Derivatives Risk.</b> Derivatives Risk is a combination of several risks, including the risks that: (1) an investment in a derivative instrument may not correlate well with the performance of the securities or asset class to which the Fund seeks exposure, (2) derivative contracts, including options, may expire worthless and the use of derivatives may result in losses to the Fund, (3) a derivative instrument entailing leverage may result in a loss greater than the principal amount invested, (4) derivatives not traded on an exchange may be subject to credit risk, for example, if the counterparty does not meet its obligations (see also &#8220;Counterparty Risk&#8221;), and (5) derivatives not traded on an exchange may be subject to liquidity risk and the related risk that the instrument is difficult or impossible to value accurately. As a general matter, when a Fund establishes certain derivative instrument positions, such as certain futures, options and forward contract positions, it will segregate liquid assets (such as cash, U.S. Treasury bonds or commercial paper) equivalent to the Fund&#8217;s outstanding obligations under the contract or in connection with the position. In addition, recent legislation has called for a new regulatory framework for the derivatives market. The impact of the new regulations are still unknown, but has the potential to increase the costs of using derivatives, may limit the availability of some forms of derivatives or the Fund&#8217;s ability to use derivatives, and may adversely affect the performance of some derivative instruments used by the Fund as well as the Fund&#8217;s ability to pursue its investment objective through the use of such instruments.<br/><br/><b>Emerging Markets Risk.</b> Investing in securities of issuers tied economically to emerging markets entails all of the risks of investing in securities of non-U.S. issuers detailed below under &#8220;Non-U.S. Securities Risk&#8221; to a heightened degree. These heightened risks include: (i) greater risks of expropriation, confiscatory taxation, nationalization, and less social, political and economic stability; (ii) the smaller size of the markets for such securities and a lower volume of trading, resulting in lack of liquidity and in price volatility; (iii) greater fluctuations in currency exchange rates; and (iv) certain national policies that may restrict a Fund&#8217;s investment opportunities, including restrictions on investing in issuers or industries deemed sensitive to relevant national interests.<br/><br/><b>Equity Securities Risk.</b> Because it purchases common stocks and other equity securities, the Fund is subject to the risk that stock prices will fall over short or long periods of time. In addition, common stocks represent a share of ownership in a company, and rank after bonds and preferred stock in their claim on the company&#8217;s assets in the event of bankruptcy.<br/><br/><b>ETF Risk.</b> <b></b>The price movement of an ETF may not exactly track the underlying index and may result in a loss. In addition, shareholders bear both their proportionate share of the Fund&#8217;s expenses and similar expenses of the underlying investment company when the Fund invests in shares of another investment company.<br/><br/><b>Hedging Risk.</b> Although intended to limit or reduce investment risk, hedging strategies may also limit or reduce the potential for profit. There is no assurance that hedging strategies will be successful.<br/><br/><b>Illiquid and Restricted Securities Risk.</b> The Sub-Adviser may not be able to sell illiquid or restricted securities at the price it would like or may have to sell them at a loss. Securities of non-U.S. issuers and emerging markets securities in particular, are subject to greater liquidity risk.<br/><br/><b>Industry Concentration Risk.</b> Because the Fund normally invests at least 80% of the value of its assets in healthcare companies, the Fund&#8217;s performance largely depends on the overall condition of the healthcare industry and the Fund is susceptible to economic, political and regulatory risks or other occurrences associated with the healthcare industry.<br/><br/><b>Interest Rate Risk.</b> When interest rates decline, the value of fixed rate securities already held by the Fund can be expected to rise. Conversely, when interest rates rise, the value of existing fixed rate portfolio securities can be expected to decline. A fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a fund with a shorter average portfolio duration.<br/><br/><b>Leverage Risk.</b> The Fund is authorized to borrow in an amount up to 33 1/3% of its total assets (including the amount borrowed). The use of leverage for investment purposes creates opportunities for greater total returns, but at the same time involves risks. Any investment income or gains earned with respect to the amounts borrowed that are in excess of the interest that is due on the borrowing will augment the Fund&#8217;s income. Conversely, if the investment performance with respect to the amounts borrowed fails to cover the interest on such borrowings, the value of the Fund&#8217;s shares may decrease more quickly than would otherwise be the case. Interest payments and fees incurred in connection with such borrowings will reduce the amount of net income available for payment to Fund shareholders.<br/><br/><b>Management Risk.</b> The Fund relies on the Sub-Adviser&#8217;s ability to achieve its investment objective. The Sub-Adviser may be incorrect in its assessment of the intrinsic value of companies whose securities the Fund holds, which may result in a decline in the value of Fund shares and failure to achieve its investment objective. The Fund&#8217;s portfolio managers use qualitative analyses and/or models. Any imperfections or limitations in such analyses and models could affect the ability of the portfolio managers to implement strategies.<br/><br/><b>Mid-Cap Company Risk.</b> Investing in securities of mid-cap companies may entail greater risks than investments in larger, more established companies. Mid-cap companies tend to have more narrow product lines, more limited financial resources and a more limited trading market for their stocks, as compared with larger companies. As a result, their stock prices may decline significantly as market conditions change.<br/><br/><b>Non-Diversification Risk.</b> As a non-diversified fund for the purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund. This risk is particularly pronounced for the Fund, which from time to time may own a very small number of positions, each of which is a relatively large portion of the Fund&#8217;s portfolio.<br/><br/><b>Non-U.S. Securities Risk.</b> Investments in securities of non-U.S. issuers involve certain risks not involved in domestic investments (for example, fluctuations in foreign exchange rates (for non-U.S. securities not denominated in U.S. dollars); future foreign economic, financial, political and social developments; nationalization; exploration or confiscatory taxation; smaller markets; different trading and settlement practices; less governmental supervision; and different accounting, auditing and financial recordkeeping standards and requirements) that may result in the Fund experiencing more rapid and extreme changes in value than a fund that invests exclusively in securities of U.S. companies. These risks are magnified for investments in issuers tied economically to emerging markets, the economies of which tend to be more volatile than the economies of developed markets. In addition, certain investments in non-U.S. securities may be subject to foreign withholding taxes on interest, dividends, capital gains or other income. Those taxes will reduce the Fund&#8217;s yield on any such securities. See the &#8220;Taxation&#8221; section below.<br/><br/><b>Portfolio Turnover Risk.</b> High portfolio turnover will increase the Fund&#8217;s transaction costs and may result in increased realization of net short-term capital gains (which are taxable to shareholders as ordinary income when distributed to them), higher taxable distributions and lower after-tax performance. During the last fiscal year, the Fund experienced a high portfolio turnover rate.<br/><br/><b>Risk of Substantial Redemptions.</b> If substantial numbers of shares in the Fund were to be redeemed at the same time or at approximately the same time, the Fund might be required to liquidate a significant portion of its investment portfolio quickly to meet the redemptions. The Fund might be forced to sell portfolio securities at prices or at times when it would otherwise not have sold them.<br/><br/><b>Securities Lending Risk.</b> The fund may make secured loans of its portfolio securities. Any decline in the value of a portfolio security that occurs while the security is out on loan is borne by the Fund, and will adversely affect performance. Also, there may be delays in recovery of securities loaned, losses in the investment of collateral, and loss of rights in the collateral should the borrower of the securities fail financially while holding the security.<br/><br/><b>Securities Market Risk.</b> The value of securities owned by the Fund may go up or down, sometimes rapidly or unpredictably, due to factors affecting particular companies or the securities markets generally. A general downturn in the securities market may cause multiple asset classes to decline in value simultaneously. Many factors can affect this value and you may lose money by investing in the Fund.<br/><br/><b>Short Sales Risk.</b> This is the risk of loss associated with any appreciation on the price of a security borrowed in connection with a short sale. The Fund may engage in<b></b> short sales that are not made &#8220;against-the-box&#8221; (as defined under &#8220;Description of Principal Investments&#8221;), which means that the Fund may sell short securities even when they are not actually owned or otherwise covered at all times during the period the short position is open. Short sales that are not made &#8220;against-the-box&#8221; theoretically involve unlimited loss potential since the market price of securities sold short may continuously increase.<br/><br/><b>Small-Cap Company Risk.</b> Investing in the securities of small-cap companies either directly or indirectly through investments in ETFs, closed-end funds or mutual funds (&#8220;Underlying Funds&#8221;) may pose greater market and liquidity risks than larger, more established companies, because of limited product lines and/or operating history, limited financial resources, limited trading markets, and the potential lack of management depth. In addition, the securities of such companies are typically more volatile than securities of larger capitalization companies.<br/><br/>An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. As with any mutual fund, there is no guarantee that the Fund will achieve its goal.You may qualify for sales charge discounts on purchases of Class A Shares if you and your family invest, or agree to invest in the future, at least $50,000 in the Fund.50000Total Annual Fund Operating Expenses differ from the ratio of expenses to average net assets shown in the Financial Highlights, which reflect the operating expenses of the Fund and do not include acquired fund fees and expenses.October 31, 20147.06When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund.<b>Non-Diversification Risk.</b> As a non-diversified fund for the purposes of the 1940 Act, the Fund may invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. The Fund&#8217;s investment in fewer issuers may result in the Fund&#8217;s shares being more sensitive to the economic results of those issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund.An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency.The bar chart and the performance table below provide an indication of the risks of investing in the Fund by showing changes in the performance of the Fund&#8217;s Class A Shares from year to year and by showing how the Fund&#8217;s average annual returns for the Fund&#8217;s Class A, Class C and Class Z Shares compared to those of a broad measure of market performance.1-877-665-1287https://www.highlandfunds.com/Funds&#8212;&#8212;&#8212;Performance/Mutual-Funds/Alternative-Investment/Long-Short-EquityAs with all mutual funds, the Fund&#8217;s past performance (before and after taxes) does not predict how the Fund will perform in the future.The bar chart does not reflect the deduction of applicable sales charges for Class A Shares. If sales charges had been reflected, the returns for Class A Shares would be less than those shown below.After-tax returns in the table above are shown for Class A Shares only and will differ for Class C and Class Z Shares.After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes.Actual after-tax returns depend on an investor&#8217;s tax situation and may differ from those shown. For example, after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts.The 1 year average annual return after taxes on distributions and redemptions is higher than the 1 year average annual return after taxes on distributions because of realized losses that would have been sustained upon the sale of fund shares immediately after the relevant periods.year-to-date total return2013-09-300.0915highest calendar quarter total return2009-09-300.1042lowest calendar quarter total return2008-09-30-0.0559<div style="display:none">~ http://www.highlandfunds.com/role/ScheduleShareholderFeesHighlandLongShortEquityFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAnnualFundOperatingExpensesHighlandLongShortEquityFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleExpenseExampleTransposedHighlandLongShortEquityFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleExpenseExampleNoRedemptionTransposedHighlandLongShortEquityFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAverageAnnualTotalReturnsTransposedHighlandLongShortEquityFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAnnualTotalReturnsHighlandLongShortEquityFundBarChart column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleShareholderFeesHighlandFloatingRateOpportunitiesFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAnnualFundOperatingExpensesHighlandFloatingRateOpportunitiesFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleExpenseExampleTransposedHighlandFloatingRateOpportunitiesFund column period compact * ~</div><div style="display:none">~ http://www.highlandfunds.com/role/ScheduleAverageAnnualTotalReturnsTransposedHighlandFloatingRateOpportunitiesFund column period compact * ~</div>Annual Total Return</br>(As of December 31 for Class A Shares)Figures are based on borrowings of 3.20% of the Fund's total assets (including the proceeds of such borrowing), the actual average amount of leverage utilized during the Fund's prior fiscal period.Highland Capital Management Fund Advisors, L.P. (the "Adviser") has contractually agreed to limit the total annual operating expenses (exclusive of fees paid by the Fund pursuant to its distribution plan under Rule 12b-1 under the Investment Company Act of 1940, as amended, taxes, brokerage commissions and other transaction costs, acquired fund fees and expenses, and extraordinary expenses) of the Fund to 0.95% of average daily net assets of the fund (the "Expense Cap"). The Expense Cap will continue through at least October 31, 2014, and may not be terminated prior to this date without the action or consent of the Fund's Board of Trustees. Highland Funds I (the "Trust"), on behalf of the Fund, has contractually agreed to pay the Adviser all amounts previously paid, waived or reimbursed by the Adviser with respect to the Fund pursuant to the Expense Cap, provided that the amount of such additional payment in any year, together with all other expenses of the Fund, in the aggregate, would not cause the Fund's total annual operating expenses in any such year to exceed the amount of the Expense Cap, and provided further that no additional payments by the Trust will be made with respect to amounts paid, waived or reimbursed by the Adviser more than 36 months after the date the Fund accrues a liability with respect to such amounts paid, waived or reimbursed by the Adviser. The Adviser may not recoup any amounts previously paid, waived or reimbursed under the Expense Cap before payment of the Fund's operating expenses for the year in which the Adviser intends to recoup such amounts.After Expense ReimbursementAfter reimbursement. Total Annual Fund Operating Expenses differ from the ratio of expenses to average net assets shown in the Financial Highlights, which reflect the operating expenses of the Fund and do not include acquired fund fees and expenses.Highland Capital Management Fund Advisors, L.P. (the "Adviser") has contractually agreed to limit the total annual operating expenses (exclusive of fees paid by the Fund pursuant to its distribution plan under Rule 12b-1 under the Investment Company Act of 1940, as amended, taxes, brokerage commissions and other transaction costs, acquired fund fees and expenses, extraordinary expenses and dividend expense on short sales) of the Fund to 1.50% of average daily net assets of the fund (the "Expense Cap"). The Expense Cap will continue through at least October 31, 2014, and may not be terminated prior to this date without the action or consent of the Fund's Board of Trustees. Highland Funds I (the "Trust"), on behalf of the Fund, has contractually agreed to pay the Adviser all amounts previously paid, waived or reimbursed by the Adviser with respect to the Fund pursuant to the Expense Cap provided that the amount of such additional payment in any year, together with all other expenses of the Fund, in the aggregate, would not cause the Fund's total annual operating expenses in any such year to exceed the amount of the Expense Cap, or any other agreed upon expense limitation for that year, and provided further that no additional payments by the Trust will be made with respect to amounts paid, waived or reimbursed by the Adviser more than thirty-six (36) months after the date the Fund accrues a liability with respect to such amounts paid, waived or reimbursed by the Adviser. The Adviser may not recoup any amounts previously paid, waived or reimbursed under the Expense Cap before payment of the Fund's operating expenses for the year in which the Adviser intends to recoup such amounts.The Fund's year-to-date total return for Class A Shares through September 30, 2013 was 1.81%. The Fund's year-to-date total return for Class A Shares through September 30, 2013 was 16.79%."Other Expenses" have been annualized.Highland Capital Management Fund Advisors, L.P. ("HCMFA" or the "Adviser") has contractually agreed to limit the total annual operating expenses (exclusive of taxes, brokerage commissions and other transaction costs, acquired fund fees and expenses and extraordinary expenses) of the Fund to 0.55% of average daily net assets of the fund (the "Expense Cap"). The Expense Cap will continue through at least October 31, 2014, and may not be terminated prior to this date without the action or consent of the Fund's Board of Trustees. Highland Funds I (the "Trust"), on behalf of the Fund, has contractually agreed to pay the Adviser all amounts previously paid, waived or reimbursed by the Adviser with respect to the Fund pursuant to the Expense Cap, provided that the amount of such additional payment in any year, together with all other expenses of the Fund, in the aggregate, would not cause the Fund's total annual operating expenses in any such year to exceed the amount of the Expense Cap or any other agreed upon expense limitation for that year, and provided further that no additional payments by the Trust will be made with respect to amounts paid, waived or reimbursed by the Adviser more than thirty-six (36) months after the date the Fund accrues a liability with respect to such amounts paid, waived or reimbursed by the Adviser. The Adviser may not recoup any amounts previously paid, waived or reimbursed under the Expense Cap before payment of the Fund's operating expenses for the year in which the Adviser intends to recoup such amounts.Highland Capital Management Fund Advisors, L.P. (the "Adviser") has contractually agreed to waive 1.25% of the Fund's management fee. This fee waiver will continue through at least October 31, 2014, and may not be terminated prior to this date without the action or consent of the Fund's Board of Trustees. The Fund's year-to-date total return for Class A Shares through September 30, 2013 was 9.15%. After Management Fee WaiverEX-101.SCH
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